The US Exit from the JCPOA: What Consequences for Iranian Energy?

On May 8, the United States announced their immediate and full withdrawal from the Iran nuclear deal, formally known as the Joint Comprehensive Plan of Action (JCPOA). This came with the re-imposition of all nuclear-related US sanctions and possibly several new sanctions.

It is common knowledge that before implementation of the JCPOA in January 2016, Iran’s energy industry has been suffering tremendously from international sanctions. Amongst others, the sanctions caused a sharp decline in oil exports and forced all European companies out of the country.

The resulting question is: What consequences will there be for Iranian energy this time? The brief answer is that the short-term effects will be lower than in 2012, and mainly consist of a decline in oil exports in the range of perhaps 15 to 20 per cent compared with 2017 levels of around 2.5 million b/d. At least for some time, the loss in oil exports will be offset by larger oil revenue as a result of higher oil prices. In the long-run, though, the country’s oil and natural gas sector is probably going to be confronted with a formidable challenge.